tv [untitled] June 8, 2012 8:00pm-8:30pm EDT
this will help us move toward reauthorization of tanf and ancillary measures. thank you. hearing's adjourned. tonight, the american bankers association with its forecast for the u.s. economy, then a senate finance hearing on a welfare program to assist needy families, after that, a senate banking committee meeting and later, a house foreign affairs committee hearing on u.s. aid to afghanistan. >> just talking about reform doesn't solve anything. you've got to get specific about it and like i said, if anybody in this room designed a plan, i could sign on to 90% of them.
>> from berkshire hathaway way chairman, warren buffett, saturday night at 8:00 eastern on cspan. >> the american bankers association today offered its economic forecast for the next year. the group is expecting a moderate cov moderate recovery, but is somewhat uncertain because of spending cuts scheduled to take effect next year, the advisory committee chairman's remarks are almost half an hour. good morning, everyone. the committee's forecast continued moderate economic growth of 2.2% in 2012, followed by a relatively modest, moderate economic growth in 2013. 2013 will likely be way weighed down by fiscal uncertainties and
that as a result, our forecast is probably a bit more modest. certainly if we were not encountering this fiscal cliff in 2013 and maybe the forecast would be considerably higher. but general moderate growth is the overall forecast. in general, personal consumption has been quite solid this year. started off the year approaching 3% annualized growth rate. consumers went out and made a large consumer durable purchases, essentially, oubls and that trend is probably going to continue throughout 2012. you can see the forecast shows a pick up in consumer spending. a moderate pick up in the second half of the year. now, consumers are benefitting from the lowest household financial obligation ratio since 1984. those low interest rates have
helped consumers to improve their balance sheets. employment growth has been quite good and the household survey, 1.5% according to the payroll survey in the first quarter, annual basis, so even though you've had modest slowdown recently, there have been some significant improvements in labor markets in the last year. however, having said that, there are still some consumers in numbers that real disposable income growth has been quite modest during this particular economic recovery and that could become an issue if there are some shocks to the economy. for example. so, and we do see that there are some significant risks, primarily from euro zone sovereign debt crisis, but also from the u.s. fiscal situation. and in essence, both of those
are moderating our views on many of the economic growth areas including business equipment, investment inventories and exports. a drop here this morning in april according to the most recent data releases. overall going into next year with the fiscals, we have consumer personal consumption dropping off in the first half of the year. before gaining some traction later on. in flags forecast for moderate inflation around 2% annualized rate. not an inflationary situation either. relatively modest inflation. from the perspective of the banking industry, our forecast
for lending is actually quite robust. lending forecasted to grow at double digit rates over 11% in 2012. easing up on growth rates next year, but still remaining relatively strong and also consumer lending is also expected to remain quite solid. clearly supported of overall recovery of the consumer and the economy. the large consensus, the wide majority of members in our committee, think that both credit availability and credit quality are going to improve in the next six months. so again, that is also supportive again of our forecast for at least a solid second half. of 2012. overall, the labor markets would become a bigger area of focus.
there are some different views on that. some think that the weather is an unusual factor that tended to move employment around from month to month, but again, the forecast called for relatively firm employment growth. it comes out to about a few million per year. that's not bad. that's what we've seen, even a little better than what we've seen in the early years with the recovery. the unemployment rate could start to be slow in coming down however because the participation rate could rise. more people could be incouraged to come back into the workforce. although that is again an area with various opinions on the committee. and with that, open it up for questions.
>> as far as the u.s. fiscal situation, i guess it kind of depends on what they do and when, right? and how much the different scenarios, how much impact on economic growth they have. like say they don't do anything until after the election, but say they just like do a short-term extension of the tax cuts and maybe somehow avoid the sequester, but don't really solve the whole thing and kick it into the next year, versus like doing a full board of deal after the election versus doing nothing at all and the sequester happens. how much do all these scenarios, what's the difference of economic projection? >> it's a very challenging environment to forecast. given that there's great deal of uncertainty.
on the forecast. i think many planners in the economy as well. there's tremendous uncertainty in terms of tax policy. right, this is one example. the so-called bonus appreciation on capital equipment, that's been coming down. that probably has some impact on capital spending this year. we've seen slow down in capital spending. there will probably be another cut at the beginning of the year. that's an example of how fiscal uncertainty can impact real economic decisions. in general, the weather, another area would be the for example capital gains tax cuts. how is that going to affect financial market this is year. that also could have some already near term effects that again create uncertainty.
and prevent business planners and forecasters to be able to see and have more active forecasts. so in general, the it's a lot of forecast risk. from our perspective, we're sure about certainty to the economy and to the consent that a consensus can be somehow built in washington with regards to the budget to perhaps a compromise, but at least a consensus. that would be a best for the economic forecast. yes? >> pedro from reuters. so, a couple of questions in one. you see the probability of departure, is it potentially at 55%. could you shed a little light on what the committee's thinking was on that? which countries are at risk and what the probableties are and do you see any scenario in which
the exit would not lead to contagion in other countries and is there a disconnect between that probability and the probability of another u.s. recession given how weak our economy already seems to be. i would imagine if there was a 55% probability of a country leading the euro, the chances of a u.s. recession would be significantly higher. >> yeah. that's any one country within the euro. and i think most expect that that one country would likely be greece. it's also the general view that if if indeed greece does leave the euro, it would likely be the case that there would be significant policy response in europe to put up firewalls essentially. and prevent the crisis from spreading.
that essential ly is our view. i don't think it's necessarily the case myself and it's a done deal that greece is leaving for example because it would probably have enormous costs to greece as well. so, but having said that, that would be the continuing news from euro, it's having a negative effect on financial markets. that would be the primary mechanism where by a disturbance in europe would actually impact the u.s. economy. export numbers actually are holding up quite well overall. it is important. i think the committee does think it's important that those uncertainties be reduced in order for the healthiest economic exchange.
>> growth of 2.5% in the fourth quarter of this year and then deaccelerated sharply to 1.9. what's the reason for that? >> okay, the question is gdp is growing, forecast for 2.4% in the fourth quarter and that deaccelerates in the first quarter. again, that is primarily a function of the uncertainty and fiscal policy. sequestration is scheduled to begin. other tax increases are scheduled. any other action from congress, taxes will likely rise until 2013. that's what the law is right now. so that essentially is reflecting the forecast in that slow down on consumer spending. >> what you described in bold --
again, this is very difficult to forecast in this situation because there is some presumption that there will be some kind of -- the case in talking to every single economist in a different scenario -- so again, this is baseline forecast. this is a median forecast and but again, it is a risk. yes. >> my question, first looking at the forecast this year, next year, averaging 3,000 this year and falling off to 159,000 next year and you had said that gdp forecast dips fiscal
uncertainty. is that a ticket behind why you have a payroll falling off as well or is this something es. my second question -- need to do more or just maintain stocks? >> the essentially, the payrolls follow gd prk. generally is a lagging indic e indicator of gdp growth. that's why the labor market, employment growth is generally coming down at a slower pace. on the second question, terms of the future monetary policy actions, the economy right now is essentially growing at a moderate pace. there's not an issue with inflation. there's not a deflation type situation. there's not an excessive
inflation situation. so essentially, based on that, there's really little, the committee doesn't think that the federal reserve is likely to do any further type of monetary actions. of a qe type nature. there are some viewpoints that perhaps the operation twist might be extended in some different ways again that's a minority view. the view is pretty much that we're status quo in terms of monetary policy. now, there there's a lot of uncertainty out there. the debt crisis is contained and at least gradual, but substantial movement on u.s. fiscal policy issues. and so to the extent that the economy remains on a firm
footing, moderate economic growth, our forecast will be that the federal reserve will not do any other extraordinary type measures. >> the growth rate this year -- 2013, the growth rate goes down to 7.3%. is that more a function do you think of demand? the demand from businesses will be less or regulatory issues or both? >> that's generally based on economic macro type variables. you know, one variable for example that is a important and len lending is business equipment. tax benefits are easing again. that will likely result in
slower growth and capital spending. also, we've kind of had a bit of a cyclical surge here. in terms of the cni lending and typically as we go further into the economic cycle, the growth section slowing, there will be amounts continuing to rise. there's a little bit of that effect as well. in terms of regulatory cost, yes. the industry is inferring higher regulatory costs. >> wondering if you can just walk us through the export projections and -- >> there is some divergence of viewpoints on this. i should mention. the actual export growth has been coming in, came in quite
strong in the early parts of the year. in general, our view is that even with the european slow -- it was strictly confined to europe. some of our protections are going tor a half a percent. the otherwise that we had. a lot of the -- through all parts and types -- we export everything including energy. so, u.s., that in itself helps to keep export growth on a firm fwround. . from collapsing, if you will. even the world economy does go into a worst case kind of
scenario, butt in general, the improvements for example, china, even if it shows down to 7% rate, and they still probably would be needing be importing in order to support that growing economy. so really a question of degree. and with regards to a lot of the emerging market economies are actually, even though growth, export demand may be softening, they're compensating that by easing of monetary policies and that generally is a trend in emerging market economies, so that's going to help support domestic demand within those countries and that in turn should be supportive of increased exports of demand from the u.s.
yes? >> savings rates on the decline. there is significant stir in that, especially with the stuff around the world that all of a sudden -- is there a strong risk of that? >> yeah, there is a risk. there is a risk. the -- again, looking at real disposable income, that hasn't been as robust as the spending has. that is a concern should there be a shock. that will likely improve somewhat here in the near term. when you think about real diz posable income, one of those is what's inflation. and in the near term, we're getting a little bit of an energy price reduction, so that's providing a bit of an added boost. to consumers. so then again, that would likely
feed through and help support that number. the real disposable income number. two financial markets, stock market, both losses, if they're sustained, obviously, that would be a negative for consumer wealth. and that could also have an effect. a wealth effect on consumers. i think that's tied up with the risks. it's important to be a continued expansion. even at a moderate pace in order to continue those consumer story growing. i just want to add one -- bit of commentary. different parts of the country are also doing well. some better than others. but for example, i'm from the industrial midwest. the unemployment rates in the industrial midwest came down 3.4% from the recession peaking
out. that's almost twice the amount of the national average. i think it was maybe more than twice the national average. and that's because manufacturing is improving. manufacturing unemployment. energy, also supportive. so in general, a lot of the central part of the country is doing a lot better than maybe certain regions of the country which are becoming more -- for example, the pacific states have shown some of the worst record in unemployment. mid-atlantic states are also below average. if you look at some of the unemployment rates, they're well below the national average. even the michigan unemployment rate is now at the national average. >> what was the -- what topic
was there that most disagree about members? >> that's hard to say. i was -- okay. there is actually a surprising amount of consensus about the members, but there's a little bit of distinction between those that were a bit more concerned about the sovereign debt rice crisis and those that felt that were very confident and leadership in both europe and in the yit were to take care of revolve those issues tended to have a stronger forecast. >> no further questions. we'll conclude there. thanks everyone for coming and please do introduce yourself to our members. if you have other questions, thanks again. >> thank you.
still ahead, a committee on the welfare program. after that, a senate banking committee hearing on jpmorgan's recent loss of at least $2 billion and later, a house fortune affairs committee meeting on u.s. aid to afghanistan. next week, "washington journal" looks at federal agencies that enforce financial regulations. on monday, we talk with former securities and change commissioner, harvey pitt. on tuesday, our guest is commodity futures trading commissioner. wednesday, the treasury department's undersecretary for domestic finance, mary miller. thursday, shealy bair who headed
the deposit insurance corporation and we wrap up the series friday with skip humphrey of theoumer protection bureau. "washington journal's" look at financial regulators every day next week at 9:15 a.m. eastern on cspan. the senate finance committee this week looked at the temporary assistance for needy families program. it replaced a previous welfare program and limited the amount of time people can receive benefits. senator max baucus of montana chaired the hearing. >> come to order. robert kennedy once said as long
as there is plenty, poverty the evil. nearly 50 million americans are currently living in poverty. that includes 16 million children. in 2009 more than 31% of working families were in poverty. that's more than 10 million people. our safety net is designed to give those in poverty a fighting chance. temporary assistance for needy families or tanf is one of those bedrocks. tanf gives people access to job training and education, and it helps fight the evil of poverty. today we will look at tanf and the new challenges facing american in poverty. until the 1996 reform law welfare was open ended. but through reform congress gave the system direction. it now focuses on jobs and promotes self-sufficiency, figuratively speaking it aims to teach people to fish.
tanf now helps some people by funding child care, transportation and job search support. in 2005, the deficit reduction act changed the way states managed tanf case loads and countered participation in some programs. those changes did not focus on serving families and helping people find jobs. instead, some states used the changes to artificially reduce caseloads. and they used tanf funds for other programs. we saw this come to play during the great recession. tanf did not respond to the recession as many of us would have hoped. other safety net programs expanded to make sure families were properly fed and had access to medical care. tanf, however, did not. some states actually cut caseloads, but people were not rising out of poverty. fewer than 2 million families received cash assistance through tanf last year. that's far less than in previous years. while we have corresponded to
see the numbers of tanf recipients decrease and we want it to be for the right reason because people are finding work. we make sure it's not because people are falling through the cracks without assistance or without a job. we need to learn from the lessons of the great recession. tanf works well when there are jobs open for people to fill. but when there are millions of people looking for work, the program doesn't respond as well as it should. our goal should be to craft a system that works regardless of the economic climate. tanf expires on september 30. we have an opportunity to strengthen it as we work toward reauthorization. and we need to keep our core principle in mind through that process. the united states must have a strong social safety net. it is not just for the sake of having one. the american people are our greatest national resource and as a nation we cannot afford to leave anyone behind. leaders can't lead if they're hungry.
inventors can't invent if they're homeless. so let us prepare for a full reauthorization of tanf and remember, their nation is only as great as the least among us. and let us move forward to fight the evil of poverty. senator hatch. >> thank you, mr. chairman. i want to thank you for holding this important hearing on poverty and the effect it has on children and families. with our economy still struggling, poverty remains a critical challenge for our nation. the 2010 poverty rate of 15.1% was the highest seen in the past 17 years. the current economic recession, especially -- is especially acute for children. in 2010 over one in five children were poor in this country. that is up from one in six in 2006. poverty is also an incredibly complicated issue, one that the federal government can only address within the bounds of a federal system that reserves